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Empirical Investigation of Business Incubation Service Components in Indian

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 Proceedings of ICRBS 2017
December 16-17, 2017
Department of Management Studies, IIT Roorkee

Empirical Investigation of Business Incubation

Service Components in Indian Technology Business
Incubators (TBIs)
Aashish Kumar
Entrepreneurship Development Institute of India

Abstract: Business Incubators play a vital role in the strengthening of startup ecosystem of any nation by enhancing the chances of
survival and success of startups. Literature indicates economies across globe have identified it as a tool for economic development. In
India Business Incubation started long back, but after Startup India (2016) the growth in inception of business incubators by different
funding agencies has recorded. Successful business incubation depends on different factors. This paper empirically posit the
underplaying components of business incubation service perceived by the incubate startups. Data was collected from 114 incubatees
from 35 business incubators in India through online survey questionnaire and personal visit. Exploratory factor analysis was performed
to identify major components. Findings present sets of effectively delivered services and scope of improvement as well. The paper
illustrate there are some serious business incubation service gap which need to be resolved by future research.

1. INTRODUCTION hence the challenges and practice philosophies for business

Startups and Startup culture has been recognized as a very
important factor of economic development. As economic
development depends upon several aspects and according to
world economic forum economies across globe has been
classified into three categories: factor driven, efficiency driven
and innovation driven. According to the definition of Startups;
they need a conducive ecosystem for their organic
development and they are prone to immature death as well
because the definition of startup itself claims startups are in
search of or under discovery of new, innovative products and
services with scalable and repeatable business model (Kidder,
2013). Startups have high potential for exponential growth as
well high vulnerability of death due to which they need
support system. Business Incubators developed as a hatching
system for startups and evidences from across globe has
established it as celebrated policy tool for entrepreneurship
development (Ahmad, 2014). Business Incubators help
startups to survive and achieve growth momentum in the
dynamic and competitive environment (Aashish, 2017). As
business incubators works in dynamic environment they are
also required to keep updating their practices and since its start
it has developed a lot (Patton, Warren, & Bream, 2009). The
concept of Business Incubation basically originated in the U.S.
context. But today as every country is aspiring to establish
itself as innovation driven economy irrespective of their origin.
Policy makers have identified it as a trusted policy tool to
enterprise creation, development and employment generation
as well. Therefore the context of every nation is different
incubators of respective nations are respectively exclusive. In
India business incubation is not very new but indeed it is not
matured, since the focus of state and central level governments
in India has always been towards organic economic
development. Very recently in 2016 central government of
India launched Startup India initiatives followed by state
startup policies. One very common factor evolves which has
been prominently emphasiszed, that is the capacity building of
existing business incubators and establishment of new business
incubators in different parts of India. As mentioned earlier
business incubation system in India and such developing
nation is under development phases of theory and practice as
well. The alignment of theory and practice is made by research
interventions and the researches on business incubation are
mostly US and UK based (Hackett & Dilts, 2004) and the
success of Business Incubators is heavily dependent upon
contextual issues (Aashish, 2017) that’s why there is immense
need for economy and context oriented research on business
incubation theory and practice development.
2. LITERATURE REVIEW AND SCALE ADOPTION
In the light of extensive literature review, the researcher has
identified the gap of knowledge in two fold, first if any system
wants to improve its service delivery process than the
perception of service takers are very important. In the context
of Hackett and Dilt’s (2004) conceptual background there are
five building blocks of research on business incubation:
incubator development, incubator configurations, incubatee

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 Empirical Investigation of Business Incubation Service Components in Indian Technology Business Incubators (TBIs)
development, incubator-incubation impacts, and theorizing
about business incubation (Hackett & Dilts, 2004).
Research driven body of literature on Indian business
incubation phenomena is very scarce and immature with
limited academic research protocol adherence. A few
conceptual documents / papers on Indian Business Incubators
is available on websites, annual reports, magazines etc.
(Aashish, 2017). However there is significant gap of
empirically tested and validated research based findings for the
benchmarking of Indian business incubators. A recent study on
Effectiveness, Efficacy and Sustainability of Incubators in
India conducted by Entrepreneurship Development Institute of
India for Department of Science & Technology, Government
of India tries to benchmark the Indian Business Incubation
process with the global best practices (Murali & Sareen, 2017).
This study is more focused towards reporting of business
incubators response on their practice and performance, and
very low representation of tenant incubatee. There is need to
empirically investigate the Indian Business Incubator service
appropriateness which ultimately leads to develop a theoretical
proxy of impact of business incubators on tenant growth. This
study is an attempt to highlight the underlying components of
Indian business incubation mechanism.
To accomplish the above mentioned research objective, this
paper followed a very celebrated and empirically developed
paper (Hackett & Dilts, Inside the black box of business
incubation: Study B— scale assessment, model refinement,
and incubation outcomes, 2008). This study has been again
based on the data collected from business incubators and the
voice of service recipient has not been taken as the scope of
research was confined to incubators response only. But the
conceptual framework developed in the paper of Hackett &
Dilts (2008) is very robust and presents a four dimensional
measurement avenues to map incubation performance that are:
Selection Performance; Monitoring and Business Assistance
Intensity; Resource Allocation and Professional Management
Services. Under the light of this paper has modified the
questionnaires and customized the variable composition by
deleting the first criteria “selection performance”.
3. METHODOLOGY
In reference to above discussion, quantitative method has been
applied on the primary metric data collected through
questionnaire based survey from Indian Startups which are
currently availing the services of business incubators. The
TABLE No. 01: Variable loading on MBA Intensity using Rotated Component Matrixa
eCQMBA078_Our startup receives comprehensive & quality operation related advice and assistance
from the Business Incubator.
Proceedings of International Conference on ‘Research and Business Sustainability’
survey instrument is primarily based on the study (Hackett &
Dilts, Inside the black box of business incubation: Study B—
scale assessment, model refinement, and incubation outcomes,
2008) The detailed questionnaire has 74 items representing
three sections consisting of:
a. Perception of Incubatee on Monitoring and Business
Assistance (MBA) Service Intensity of Business
Incubator
b. Perception of Incubatee on Resource Allocation (RA)
c. Perception of Incubatee on Professional Management
Services (PMS)
4. SAMPLE SELECTION PROTOCOL
As in India, there is no centralized dynamic list or directory of
business incubation tenants; In phase one the researcher
requested to business incubator managers to motivate their
incubatees to participate in the survey but the response rate
was very poor. Hence for this paper researchers adopted the
strategy to collect the details of incubatees from the websites
of respective business incubators and communicate directly.
The participants were mostly from those recognized business
incubators by Startup India, we contacted every incubator and
incubatee through email, phone calls and personal visit. Some
incubators does not use to keep the names of their incubatees
on their website we personally called the incubator managers
to share the details of incubatees. Finally approx 320
incubatees from more than 60 active business incubators has
been contacted and been requested to participate in the survey.
Out of 320 survey link and questionnaire circulation among the
population of Indian incubatees 114 valid responses been
received and found eligible for data analysis.
5. RESULTS
To identify the underlying components of business incubation
services the researcher conducted Exploratory Factor Analysis
(EFA), Prior to data analysis due diligent data cleaning and
assumption validation has been performed. EFA has been
administered to access the three constructs to arrive an
empirically tested and validated Principle Component Analysis
(PCA) with Varimax Rotation application.
6. UNIDIMENSIONALITY EXAMINATION
The factor analysis performed on items related to Monitoring
and Business Assistance Service Intensity.
Component
1 2
.873
♦ 186 ♦
 Empirical Investigation of Business Incubation Service Components in Indian Technology Business Incubators (TBIs)

Component
1 2
dCQMBA077_Our startup receives comprehensive & quality production / service delivery related advice
.845
and assistance from the Business Incubator.
fCQMBA079_The host Business Incubator regularly validates the quality of potential new strategic
.838
service providers.
gCQMBA080_The host Business Incubator regularly ask you to participate in the review of the quality of
.785
its services.
cCQMBA076_Our startup receives comprehensive & quality administrative assistance from the Business
.784
Incubator.
aCQMBA074_Our startup receives comprehensive & quality business planning assistance by Business
.758 .431
Incubator.
bCQMBA075_Our startup receives comprehensive & quality business feasibility analysis from the
.739 .445
Business Incubator.
hCQMBA081_As incubatee startup, you realize the Business Incubator manager proactively find ways to
improve level of service satisfaction inside the incubator. .637 .585
bTIMBA071_Generally our startup spends appropriate time interacting and experience sharing with other
incubatees in the business incubator. .880
cTIMBA072_Generally, our startup receives sufficient time to directly work with Business Incubator
manager. .464 .717
iCQMBA082_In the host Business Incubator, other incubatee startups offer alternate or new strategies for
.412 .690
achieving growth.
aTIMBA070_The host Business Incubator generally provide appropriate time to assist our Startup .436 .668
dTIMBA073_Our startup reduces the likelihood of making expensive business mistakes through the
.585 .643
interaction with Business Incubator manager and other incubatee startups.

There are two factors are available for dimension examination. All as similar to conceptual building proposed by Hackett & Dilts
(2008). All the items in the first components are related to

“Comprehensiveness & Quality” of services and a few items in both components have minor cross loading as well..

The table 2 clearly indicates the development of fourth component which is one more to the theoretical background. Those
variables were Resource Availability; Quality and Utilization.

TABLE 2: Variable loading on Resource Allocation Rotated Component Matrixa

Component
1 2 3 4
cREAV085_Access to sources of capital .815
eREAV087_Access to financial and accounting control experts / accountants .803
hREAV090_Access to funding (equity, commercial or non-commercial loans
.683 .418
etc. Angel Investors, VC. Etc.)
dREAV086_Access to legal experts / lawyers .682 .405
fREQL099_We regularly receive guidance related to capital structuring,
.641 .408
sources of capital etc. from Business Incubator.
fREAV088_Access to consultants .634 .519
aREAV083_Access to administrative support .621 .536
dREUT103_Our startup promptly acts upon the advice we receive from
Business Incubator. .814

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 Empirical Investigation of Business Incubation Service Components in Indian Technology Business Incubators (TBIs)

Component
1 2 3 4
cREUT102_Our startup fully utilize the knowledge obtained from other
.795
incubatee startups.
eREUT104_Our startup promptly acts upon advice from other incubatee
.752
startups at Business Incubator
bREUT101Our startup utilizes advice obtained from the Business Incubator. .725
aREUT100_Our startup makes full use of the administrative services offered
at the Business Incubator. .671
fREUT105_Our startup has maximized its opportunity base from the network
.432 .587
connections provided by Business Incubator.
dREQL097_The culture of Business Incubator is nurturing and supportive. .723
bREQL095_The reputation of my startup enhanced due to being incubated at .707
this Business Incubator.
cREQL096_The internal environment of the Business Incubator is pleasant. .698
eREQL098_We receive business-related information from the business .675
.649
incubator in a way that is easy to understand.
aREQL094_Our Startup is offered flexible lease agreement to meet our
changing space need
iREAV091_Access to local educational and research institution contacts .758
kREAV093_Access to technology labs .434 .720
jREAV092_Access to intellectual property advice .689
gREAV089_Access to marketing strategy specialists .550 .638
bREAV084_Access to managerial expertise .541 .574

The conceptual background of PMS suggests five dimensions: Networking, Finance, Marketing, HR, and Strategic Management.
But the dimention reduction using varimax rotation presents four dimensions as presented in the table 3 below.

TABLE 3: Variable Loading of PMS with Rotated Component Matrixa

Component
1 2 3 4
fHRPMS127_Setting and reviewing salary structures .864
dHRPMS125_Supervising staff .862
eHRPMS126_Dealing with staff grievance issues and disciplinary action .834
cHRPMS124_Establishing staff appraisal and performance evaluation system .831
gHRPMS128_Assigning work, duties and responsibilities .825
bHRPMS123_Managing the hiring and firing of staff .819
aHRPMS122_Preparing job descriptions and personnel specifications .778
gFINPMS121_Making major purchasing decisions .706
hHRPMS129_Developing staff training programs .643 .562
aMARPMS106_Devising and managing marketing strategies .565 .499
dMARPMS109_Preparation of marketing materials (e.g. brochures, ads, .540 .535
website)
iMARPMS114_Online Social media interaction / campaigning .517 .475

Proceedings of International Conference on ‘Research and Business Sustainability’ ♦ 188 ♦

 Empirical Investigation of Business Incubation Service Components in Indian Technology Business Incubators (TBIs)

Component
1 2 3 4
cSMPMS132_Acting as a staff liaison with the host TBI board .815
dSMPMS133_Liaising with stakeholders, policy makers and other key players .790
fMARPMS111_Active representation of host TBI in local startup ecosystem .719 .419
aSMPMS130_Writing and refining strategic plan of your startup .466 .683
aFINPMS115_Support / help in writing grant proposal .649 .456
bSMPMS131_Defining / refining mission statement .549 .636
fSMPMS135_Undertaking feasibility studies .611
eSMPMS134_Identifying income generation opportunities for your startup .401 .610
gSMPMS136_Identifying resource requirements and cost implications .491 .522 .416
hMARPMS113_Maintaining media contacts .468 .504 .465
dFINPMS118_Monitoring budgets .495 .683
cFINPMS117_Evaluating and reporting of financial performance .534 .645
bMARPMS107_Preparation for media interaction / press release .442 .633
fFINPMS120_Maintaining a financial control system .568 .624
bFINPMS116_Preparing annual operating and capital budgets .557 .621
eFINPMS119_Establishing a financial control system .573 .615
cMARPMS108_Undertake promotional activities .440 .610
eMARPMS110_Planning special events / media opportunities .471 .558
gMARPMS112_Developing media contacts .442 .490 .530
bNET064_The Business Incubator introduced you to industry associations for .812
.789
effective assistance.
aNET063_The Business Incubator introduced you to professionals for effective
guidance / assistance related to finance, accounting, legal, marketing, strategy
etc.
eNET067_The Business Incubator frequently invite possible business partners to
.780
interact and liaise with incubatee startups.
fNET068_The interaction with Business Incubator and its network, is very
.773
relevant and useful for the operation, growth and development of your startup.
dNET066_The Business Incubator regularly introduce your startup to potential
investors.
gNET069_As a startup team, you are confident that your startup will be able to .771
.671
maintain a strong network support after incubation.
.586
cNET065_The Business Incubator assisted you in effectively deal with
government departments, ministries.

7. CONCLUSION REFERENCES

Findings of above analysis demonstrate that components in the
relevant literature are aligned with the Indian incubation
practices. Total ten components have been explored for further
research studies and the development of incubation services in
Indian context. There is a serious need to strengthen the
business incubation service portfolio or in other words we may
conclude there is ample scope for capacity building for
business incubators.
[1] Aashish, K. (2017). Business Incubation Mechanism for
Conducive Start-up Ecosystem. Journal of Management &
Entrepreneurship , 67-80.
[2] Ahmad, A. J. (2014). A mechanisms-driven theory of business
incubation. International Journal of Entrepreneurial Behavior&
Research , 375-405.
[3] Hackett, S. M., & Dilts, D. M. (2004). A Systematic Review of
Business Incubation Research. The Journal of Technology
Transfer , 55-82.

Proceedings of International Conference on ‘Research and Business Sustainability’ ♦ 189 ♦

 Empirical Investigation of Business Incubation Service Components in Indian Technology Business Incubators (TBIs)

[4] Hackett, S. M., & Dilts, D. M. (2008). Inside the black box of
business incubation: Study B—scale assessment, model
refinement, and incubation outcomes. Journal of Technology
Transfer , 439-471.
[5] Kidder, D. (2013). The Startup Playbook: : Secrets of the
Fastest-Growing Startups from Their Founding Entrepreneurs.
San Franscisco, California: Chronicle Books.
[6] McGee, J. E., Peterson, M., Mueller, S. L., & Sequeira, J. M.
(2009). Entrepreneurial Self-Efficacy: Refining the Measure.
Entrepreneurship Theory & Practice , 965-988.
[7] Murali, B. P., & Sareen, S. B. (2017). A Study on Effectiveness,
Efficacy and Sustainability of Incubators in India and
Benchmarking Them with Global Best Practices in the
Incubation Space. Ahmedabad: Entrepreneurship Development
Institute of India.
[8] Patton, D., Warren, L., & Bream, D. (2009). Elements that
underpin high-tech business incubation processes. Journal of
Technology Transfer , 621-636.

Proceedings of International Conference on ‘Research and Business Sustainability’ ♦ 190 ♦

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